INDEPENDENT BANK CORP /MI/ - FORM 8-K - EX-99.2 - EXHIBIT 99.2

Attached files

file	filename
EX-99.3 - EXHIBIT 99.3 - INDEPENDENT BANK CORP /MI/	ex99_3.htm
EX-99.1 - EXHIBIT 99.1 - INDEPENDENT BANK CORP /MI/	ex99_1.htm
8-K - 8-K - INDEPENDENT BANK CORP /MI/	form8k.htm

Exhibit 99.2

INDEPENDENT BANK CORPORATION AND SUBSIDIARIES

Supplemental Data

Non-performing assets ⁽¹⁾

	June 30, 2017			March 31, 2017			December 31, 2016			September 30, 2016			June 30, 2016
	(Dollars in thousands)
Non-accrual loans	$	8,542		$	9,014		$	13,364		$	10,801		$	10,803
Loans 90 days or more past due and still accruing interest		-			-			-			-			94
Total non-performing loans		8,542			9,014			13,364			10,801			10,897
Other real estate and repossessed assets		2,368			5,257			5,004			4,989			5,572
Total non-performing assets	$	10,910		$	14,271		$	18,368		$	15,790		$	16,469

As a percent of Portfolio Loans
Non-performing loans		0.47	%		0.54	%		0.83	%		0.67	%		0.69	%
Allowance for loan losses		1.14			1.20			1.26			1.37			1.44
Non-performing assets to total assets		0.41			0.55			0.72			0.62			0.67
Allowance for loan losses as a percent of non-performing loans		241.00			222.30			151.41			204.08			208.42

⁽¹⁾	Excludes loans classified as "trouble debt restructured" that are not past due and vehicle service contract counterparty receivables, net.

Troubled debt restructurings ("TDR")

	June 30, 2017
	Commercial		Retail			Total
	(In thousands)
Performing TDR's	$	10,551	$	56,100		$	66,651
Non-performing TDR's(1)		492		4,184	⁽²⁾		4,676
Total	$	11,043	$	60,284		$	71,327

	December 31, 2016
	Commercial		Retail			Total
		(In thousands)
Performing TDR's	$	10,560	$	59,726		$	70,286
Non-performing TDR's(1)		3,565		4,071	⁽²⁾		7,636
Total	$	14,125	$	63,797		$	77,922

(1)	Included in non-performing assets table above.

(2)	Also includes loans on non-accrual at the time of modification until six payments are received on a timely basis.

Allowance for loan losses

	Six months ended June 30,
	2017					2016
	Loans			Unfunded Commitments		Loans			Unfunded Commitments
	(Dollars in thousands)
Balance at beginning of period	$	20,234		$	650	$	22,570		$	652
Additions (deductions)
Provision for loan losses		224			-		(1,264	)		-
Recoveries credited to allowance		1,786			-		2,718			-
Loans charged against the allowance		(1,658	)		-		(1,312	)		-
Additions (deductions) included in non-interest expense		-			240		-			(67	)
Balance at end of period	$	20,586		$	890	$	22,712		$	585

Net loans charged against the allowance to average Portfolio Loans		(0.02	)%				(0.18	)%

Capitalization

	June 30, 2017			December 31, 2016
	(In thousands)
Subordinated debentures	$	35,569		$	35,569
Amount not qualifying as regulatory capital		(1,069	)		(1,069	)
Amount qualifying as regulatory capital		34,500			34,500
Shareholders’ equity
Common stock		324,231			323,745
Accumulated deficit		(57,966	)		(65,657	)
Accumulated other comprehensive loss		(3,812	)		(9,108	)
Total shareholders’ equity		262,453			248,980
Total capitalization	$	296,953		$	283,480

Non-Interest Income

	Three months ended								Six months ended
	June 30, 2017			March 31, 2017		June 30, 2016			June 30,
	June 30, 2017			March 31, 2017		June 30, 2016			2017			2016
	(In thousands)
Service charges on deposit accounts	$	3,175		$	3,009	$	3,038		$	6,184		$	5,883
Interchange income		2,005			1,922		1,976			3,927			3,854
Net gains (losses) on assets
Mortgage loans		3,344			2,571		2,529			5,915			4,171
Securities		(34	)		27		185			(7	)		347
Mortgage loan servicing, net		(158	)		825		(334	)		667			(1,312	)
Investment and insurance commissions		467			468		384			935			851
Bank owned life insurance		240			253		298			493			588
Title insurance fees		323			264		253			587			541
Other		1,084			1,000		1,251			2,084			2,466
Total non-interest income	$	10,446		$	10,339	$	9,580		$	20,785		$	17,389

Capitalized Mortgage Loan Servicing Rights

	Three months ended June 30,						Six months ended June 30,
	2017			2016			2017			2016
	(In thousands)
Balance at beginning of period	$	14,727		$	10,983		$	13,671		$	12,436
Change in accounting		-			-			542			-
Balance at beginning of period, as adjusted	$	14,727		$	10,983		$	14,213		$	12,436
Originated servicing rights capitalized		1,019			703			1,797			1,257
Amortization		-			(709	)		-			(1,266	)
Change in valuation allowance		-			(646	)		-			(2,096	)
Change in fair value		(1,231	)		-			(1,495	)		-
Balance at end of period	$	14,515		$	10,331		$	14,515		$	10,331

Valuation allowance at end of period	$	-		$	5,368		$	-		$	5,368

Mortgage Loan Activity

	Three months ended									Six months ended
	June 30, 2017			March 31, 2017			June 30, 2016			June 30,
	June 30, 2017			March 31, 2017			June 30, 2016			2017			2016
	(Dollars in thousands)
Mortgage loans originated	$	235,087		$	158,081		$	91,966		$	393,168		$	165,468
Mortgage loans sold		104,714			79,691			70,479			184,405			126,145
Net gains on mortgage loans		3,344			2,571			2,529			5,915			4,171
Net gains as a percent of mortgage loans sold ("Loan Sales Margin")		3.19	%		3.23	%		3.59	%		3.21	%		3.31	%
Fair value adjustments included in the Loan Sales Margin		0.32			0.20			0.34			0.27			0.30

Non-Interest Expense

	Three months ended							Six months ended
	June 30, 2017		March 31, 2017		June 30, 2016			June 30,
	June 30, 2017		March 31, 2017		June 30, 2016			2017		2016
	(In thousands)
Compensation	$	8,707	$	9,672	$	7,972		$	18,379	$	16,045
Performance-based compensation		2,138		1,993		1,875			4,131		3,557
Payroll taxes and employee benefits		2,535		2,482		2,153			5,017		4,279
Compensation and employee benefits		13,380		14,147		12,000			27,527		23,881
Occupancy, net		1,920		2,142		1,856			4,062		4,063
Data processing		1,937		1,937		1,936			3,874		4,037
Furniture, fixtures and equipment		1,005		977		965			1,982		1,949
Communications		678		683		722			1,361		1,610
Loan and collection		670		413		571			1,083		1,396
Advertising		519		506		478			1,025		955
Legal and professional fees		389		437		345			826		758
Interchange expense		292		283		267			575		533
FDIC deposit insurance		202		198		331			400		665
Supplies		159		172		197			331		373
Credit card and bank service fees		136		191		198			327		385
Costs (recoveries) related to unfunded lending commitments		130		110		(80	)		240		(67	)
Amortization of intangible assets		86		87		87			173		174
Net (gains) losses on other real estate and repossessed assets		91		11		(159	)		102		(165	)
Provision for loss reimbursement on sold loans		20		31		-			51		(15	)
Other		1,147		1,244		1,181			2,391		2,408
Total non-interest expense	$	22,761	$	23,569	$	20,895		$	46,330	$	42,940

Average Balances and Tax Equivalent Rates

	Three Months Ended June 30,
	2017							2016
	Average Balance		Interest		Rate ⁽²⁾			Average Balance		Interest		Rate ⁽²⁾
	(Dollars in thousands)
Assets
Taxable loans	$	1,779,916	$	19,919		4.49	%	$	1,573,471	$	18,173		4.64	%
Tax-exempt loans ⁽¹⁾		3,037		46		6.08			3,555		55		6.22
Taxable securities		503,863		2,781		2.21			541,557		2,480		1.83
Tax-exempt securities⁽¹⁾		88,731		783		3.53			50,091		432		3.45
Interest bearing cash		32,193		53		0.66			74,384		100		0.54
Other investments		15,543		239		6.17			15,478		197		5.12
Interest Earning Assets		2,423,283		23,821		3.94			2,258,536		21,437		3.81
Cash and due from banks		30,649							34,515
Other assets, net		144,673							154,859
Total Assets	$	2,598,605						$	2,447,910

Liabilities
Savings and interest-bearing checking	$	1,058,768		316		0.12		$	1,027,913		277		0.11
Time deposits		468,705		1,162		0.99			430,955		875		0.82
Other borrowings		68,511		563		3.30			47,467		485		4.11
Interest Bearing Liabilities		1,595,984		2,041		0.51			1,506,335		1,637		0.44
Non-interest bearing deposits		712,132							672,920
Other liabilities		30,394							25,855
Shareholders’ equity		260,095							242,800
Total liabilities and shareholders’ equity	$	2,598,605						$	2,447,910

Net Interest Income			$	21,780						$	19,800

Net Interest Income as a Percent of Average Interest Earning Assets						3.60	%						3.52	%

(1)	Interest on tax-exempt loans and securities is presented on a fully tax equivalent basis assuming a marginal tax rate of 35%

(2)	Annualized

Average Balances and Tax Equivalent Rates

	Six Months Ended June 30,
	2017							2016
	Average Balance		Interest		Rate ⁽²⁾			Average Balance		Interest		Rate ⁽²⁾
	(Dollars in thousands)
Assets
Taxable loans	$	1,733,225	$	39,743		4.61	%	$	1,559,807	$	36,693		4.72	%
Tax-exempt loans ⁽¹⁾		3,549		98		5.57			3,601		110		6.14
Taxable securities		512,586		5,535		2.16			531,695		4,724		1.78
Tax-exempt securities⁽¹⁾		83,417		1,481		3.55			46,036		813		3.53
Interest bearing cash		49,356		166		0.68			77,910		206		0.53
Other investments		15,543		438		5.68			15,512		397		5.15
Interest Earning Assets		2,397,676		47,461		3.98			2,234,561		42,943		3.86
Cash and due from banks		32,212							39,841
Other assets, net		149,306							159,979
Total Assets	$	2,579,194						$	2,434,381

Liabilities
Savings and interest- bearing checking	$	1,052,973		599		0.11		$	1,021,015		547		0.11
Time deposits		475,409		2,322		0.98			433,449		1,719		0.80
Other borrowings		56,823		1,033		3.67			47,495		962		4.07
Interest Bearing Liabilities		1,585,205		3,954		0.50			1,501,959		3,228		0.43
Non-interest bearing deposits		708,363							663,168
Other liabilities		29,772							24,811
Shareholders’ equity		255,854							244,443
Total liabilities and shareholders’ equity	$	2,579,194						$	2,434,381

Net Interest Income			$	43,507						$	39,715

Net Interest Income as a Percent of Average Interest Earning Assets						3.65	%						3.57	%

(1)	Interest on tax-exempt loans and securities is presented on a fully tax equivalent basis assuming a marginal tax rate of 35%

(2)	Annualized

Reconciliation of Net Interest Margin, Fully Taxable Equivalent ("FTE")

	Three Months Ended June 30,						Six Months Ended June 30,
	2017			2016			2017			2016
	(Dollars in thousands)						(Dollars in thousands)
Net interest income	$	21,492		$	19,630		$	42,958		$	39,393
Add: taxable equivalent adjustment		288			170			549			322
Net interest income - taxable equivalent	$	21,780		$	19,800		$	43,507		$	39,715
Net interest margin (GAAP) ⁽¹⁾		3.56	%		3.50	%		3.61	%		3.55	%
Net interest margin (FTE) ⁽¹⁾		3.60	%		3.52	%		3.65	%		3.57	%

(1)	Annualized

Commercial Loan Portfolio Analysis as of June 30, 2017

	Total Commercial Loans
			Watch Credits						Percent of Loan
Loan Category	All Loans		Performing		Non- performing		Total		Category in Watch Credit
	(Dollars in thousands)
Land	$	6,073	$	64	$	10	$	74		1.2	%
Land Development		4,122		-		-		-		0.0
Construction		48,002		-		-		-		0.0
Income Producing		279,480		3,647		202		3,849		1.4
Owner Occupied		275,716		8,318		147		8,465		3.1
Total Commercial Real Estate Loans	$	613,393	$	12,029		359	$	12,388		2.0

Other Commercial Loans	$	215,385	$	8,080		395	$	8,475		3.9
Total non-performing commercial loans					$	754

INDEPENDENT BANK CORP /MI/ - FORM 8-K - EX-99.2 - EXHIBIT 99.2 - July 27, 2017

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INDEPENDENT BANK CORP /MI/ Reports